What actually happens if a bond defaults?

QnA
1

Hey everyone, what actually happens if a bond defaults?
like do we lose everything or is there some process?

2

same doubt tbh
always hear “default risk” but no clue what it actually means for us

3

Good question, and an important one to understand.
When a bond defaults, it simply means the issuer is unable to pay interest or repay the principal on time.

What happens next depends mainly on the type of bond:

Secured Bonds
These are backed by the company’s assets.

  • In case of default, investors have a legal claim on those assets.

  • Recovery is usually higher compared to unsecured bonds.

Unsecured Bonds
These are not backed by specific assets.

  • Investors stand in line as creditors during recovery.

  • Recovery can be lower and may take longer.

In both cases, the matter generally goes into a structured resolution process (like NCLT) where recovery is attempted.

A default doesn’t automatically mean 100% loss, but recovery varies based on the issuer’s situation and whether the bond is secured or unsecured.

If you ever want to check which category a bond falls under, you’ll find it clearly mentioned on the bond’s detail page.

if you need any clarification regarding payout frequency, risk level, or issuer type, feel free to reach out here or through any of the channels below:
Call: +91 70711 869639
WhatsApp: +91 93807 40546
Email: support@bondscanner.com